Trading in option contracts before large price changes: A comparative study of US and UK markets

Emilios C. Galariotis (egalariotis@audencia.com), Wu Rong and Spyros Spyrou
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Emilios C. Galariotis: Audencia Recherche - Audencia Business School

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Abstract: Previous studies indicate that traders in possession of important information are more likely to transact in option contracts rather than the underlying asset. This article examines stock option trading volume before significant price changes in the underlying stock for all S&P100 and FTSE 100 constituent stocks. Our findings indicate irregular option trading volume before a significant amount of large price changes. This effect is less pronounced in the UK market.

Keywords: Price shocks; Informed trading; Option markets; Trading volume (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

Published in Journal of derivatives & Hedge Funds, 2014, 20, pp.1-9. ⟨10.1057/jdhf.2014.8⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01122593

DOI: 10.1057/jdhf.2014.8

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